Here's the privately owned housing starts recently released. Looking at the recent data, once can see the precipitous drop in these starts. As you know there has been much written regarding the linkage in the housing starts and how that data correlate (highly) with recessions. Thankfully, the good folks at the fed highlight our recessions for us which allows some reasonable review of the data performance against the backdrop of the business cycle.
Transforming the data to a % YOY change, yields the chart that you see below.
I found a couple of things surprising about looking at the data in this view.
- I would have expected the annual YOY % increase to be a little spikier given all of the "boom" information that we've heard. Our current increases are dwarfed by the other spikes.
- It does appear that we have a bit further to go on the downward side (if one can infer anything reasonable from the data presented) to reach the depths of decline that have presaged other recessions.
3 comments:
Your YOY % increases are not that great because housing starts never dropped below 1 Million in the 2001-2003 recession. Obviously if your your starts drop down to 600K units your recovery is going to look much more impressive on a percentage basis. To have a comparable percentage increase we would be up above 2,4 million unit starts: that would be a lot.
Same issue with defaults. The absolute default level is still small historically. Its just that as a percentage they are going up fast, and if that rate of increase does not slow up we are in trouble. The Center for Responsible Lending recently projected a 15% default rate on sub-prime loans. Given that the historical norm (what ever that is for a product that is really only a dozen years old) is around 11%, you could argue that they are guessing low.
The primary importance of YOY figures is that it gets rid of the seasonal issues without all the garbage seasonal adjustments the government likes to put in. The importance of percentage increases is that modern capitalism requires long term growth to work. In effect the system continuously resets the bench mark.
"The primary importance of YOY figures is that it gets rid of the seasonal issues"
Agreed. It was good for me to look at this data this way, for it put the "boom" in better perspective relative to the other years. But as I hear and read about the boom, I've not seen a more moderated perspective discussed much. So my intuition was colored. NOthing like hard data to annihilate intuition.
I'm waiting to see Wachovia's financials. They've closed on the Golden West, and Golden West had muchisimo ARMs in N. CA, S. CA and Florida--all of the problem areas.
An honest piece that actually notes the importance of home building to the local economy. It also notes that people unable to sell homes in the high priced [bubble] areas of the country is putting a crimp on sales in North Carolina.
From (quoted in part):
Raleigh North Carolina's
News & Observer
Dudley Price, Staff Writer
Sales of existing homes declined for the second consecutive month in November, further weakening the Triangle's most important industry.
Brokers closed on 5.5 percent fewer homes last month compared with a year ago in Wake, Durham, Orange and Johnston counties. The inventory of unsold homes rose 5.1 percent and the number of sellers scaling back asking prices jumped 11 percent, according to the Triangle Multiple Listing Service.
The $9.3 billion industry, which provides thousands of jobs for carpenters, plumbers, appliance dealers and interior decorators, has been pinched by fewer numbers of transplanted buyers, who had helped drive the market to records in the past two years.
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